What the dollar’s surge means for the economy
Data: ICE, FactSet; Chart: Axios Visuals
The Fed’s rate-hiking campaign has sent the value of the dollar to 20-year highs — and the surge could be another headwind for the economy.
Why it matters: A stronger dollar affects the economy in a bunch of ways.
- For better: It should help put a cap on oil prices — since oil is priced in dollars, a stronger dollar buys much more oil, thus driving the per-barrel price lower. More broadly, foreign imports get cheaper for U.S. consumers, which could help ease inflation, too.
- For worse: It will make the cost of U.S. exports — especially U.S. industrial goods — much higher for foreign buyers, depressing sales and likely hurting factory towns.
How it works: Currency values rise and fall for a number of reasons, including trade flows, budget deficits and how attractive a country is to foreign investors. But another key reason currencies move is based on what central banks do with interest…